Kerala HC Dismisses Writ Petitions
against Govt Sanction for NBFC

Islamic Finance

A Division Bench of the Kerala High Court on February 3 dismissed writ petitions filed against the government sanction for starting a Non Banking Finance Company by the Kerala State Industrial Development Corporation (KSIDC) based on Islamic principles.

The petitions were filed by Janata Party president Subramanian Swamy and others.

The bench consisting of Chief Justice J. Chelameswar and Justice P.R. Ramachandra Menon said that when the KSIDC proposed to carry on business of the NBFC in a Shari’ah-compliant manner in addition to complying with the laws of the country, that could not be condemned as promoting a religion. The court had earlier restrained the government and the Corporation from participating in it in any way, financially or otherwise, in the newly formed NBFC.

According to Dr. Swamy, the setting up of a financial service company, with government participation, which would follow the canon of law of Muslim religion, was against the secular principles. He said the company was formed strictly in accordance with the Shari’ah. He said that as per the government order, 11 per cent of the equity was held by the KSIDC. This showed the identification of the KSIDC with Islam. The setting up of a company with co-ownership of the state was antithetical to equal treatment of all religions. The state government refuted the allegation that the company functioned in terms of the Shari’ah law. The allegations were baseless and misleading, it said in an affidavit.

The company, Al Barakh Financial Services Limited, was registered under the Companies Act. It was a joint venture with private participation from big industrialists and enterprises. The company was not controlled by the government, the government had argued.